Often, the mere threat of Bankruptcy (Individual) or Winding up Petition (Company) is a very effective means to facilitate a payment from the Debtor. However, if a dispute is raised by the Debtor following receipt of a Letter of Claim, it will be seen as an abuse of process by the court if insolvency proceedings were commenced and you should proceed down the county court route, obtain Judgment for Claimant (in default) followed by the most appropriate enforcement action.
Bankruptcy and Winding up Petitions are also an alternative way of enforcing a Judgment for Claimant (in default – the debt must be over £5,000.00 for Individuals and over £750.00 for a Company.
The law assumes that a Statutory Demand (SD) in Bankruptcy, simply clears the way for the presentation of a petition. However, it can be a very compelling debt collecting device in its own right and without the need to proceed to issuing a petition.
If the debtor still refuses to settle what is outstanding, the following steps need to be applied:
- A SD will be served on the debtor (if an individual - usually by a Process Server); and in the case of a registered company, at the registered office (usually by first class post) and will detail the particulars of the debt outstanding;
- On receipt of service of the SD, the debtor has 18 days to make an application to the local court referred to within the SD, to set it aside, if the debt is disputed.
- Failing which the debtor has 21 days from service of the SD to settle in full, come to an instalment arrangement for the full balance and / or make a full and final settlement offer.
- If it is a Company, they have 21 days to attempt to come to a settlement agreement with the Creditor. The Company also has the right to make an application to the court for an injunction restraining the Creditor from presenting a Winding Up Petition or from advertising it.
- If there is no response from the debtor (day 22 after service) you can then present a Bankruptcy or Winding up Petition or no later than 4 months of service of the SD.
- A sealed Bankruptcy or Winding up Petition confirming the hearing date will be received from the court and again, if an individual, served by a Process Server; and in the case of a registered company, at the registered office (usually by first class post);
- We would then recommend instructing Agents to Advocate on our behalf as it would be more cost effective than us attending at our hourly rates + VAT. They will be provided with formal instructions and all the necessary documentation to request that a Bankruptcy / Winding up Order is granted.
- Bankruptcy applies to a person or a general partnership. If it is a general partnership, all the Partners are made bankrupt and any assets realised are sold and the proceeds are paid to the unpaid creditors.
- Creditors / Debts will be paid in the following order of priority:
- secured creditors - fees and charges of liquidation / bankruptcy.
- floating charge holders - companies only.
- preferential debtors, including unpaid wages to employees.
- unsecured creditors, including HM Revenue & Customs.
- interest payable on debts.
- shareholders - companies only.
- Creditors may receive payment of their debt, but more usually they will receive a percentage of what is owed to them.
- The early stages of a Bankruptcy or Liquidation are usually handled by The Official Receiver (OR).
- In the case of Bankruptcy, the Official Receivers, or Insolvency Practitioners (known as the Trustee) will look to realise any assets (except any reasonable domestic items and items needed for the bankrupt’s job).
- In the case of a Compulsory Liquidation, an Official Receivers, or Insolvency Practitioners (known as the Liquidator) will take control of the company and realise the company’s assets.
- A Bankrupt is usually discharged after 1 year; however, it will remain on his or her credit history for 6 years.
Please note that this is a costly route to take (in particular the Disbursements [Court Fee & Official Receiver’s Deposit], would need to be paid on account), and we would advise you on whether or not insolvency is the most effective route to follow.
In summary, bankruptcy is a versatile enforcement tool, especially if the customer is a Company Director (business could be sold and employees made redundant) or self-employed or owning an asset (properties, vehicles). It will also affect certain professional occupations such as public office positions, solicitors, and accountants.
We work closely with recognised national and local Insolvency Practitioners who would look to be appointed as Trustee in Bankruptcy of the Estate, provided there are sufficient assets to dispose of and a dividend likely to be paid to creditors.
| Personal Insolvency (Creditor’s Bankruptcy Petition) | DebtLaw uk Costs (+ VAT) | Court Fee & Official Receiver’s Deposit (2020) |
|---|
| Preparation & Instructing Process Server to serve Statutory Demand (SD2) | £350.00 | N/A |
| Preparation; Issuing & Instructing Process Server to serve Bankruptcy Petition & instructing Agent’s to attend Bankruptcy Hearing | Hourly Rate/s | £280.00 + £990.00 |
(In addition to the above, there will be disbursements such as a Bankruptcy Search, Process Servers Fees and Agents Fees for attendance at Court Hearings).
| Corporate Insolvency | DebtLaw uk Costs (+ VAT) | Court Fee & Official Receiver’s Deposit (2020) |
|---|
| Preparation & Instructing Process Server to serve Statutory Demand (SD1) | £350.00 | N/A |
| Preparation; Issuing & Instructing Process Server to serve Winding Up Petition & instructing Agent’s to attend Bankruptcy Hearing | Hourly Rate/s | £280.00 + £1,600.00 |
(In addition to the above, there will be disbursements such as Process Servers Fees; advertising in The London Gazette and Agents Fees for attendance at Court Hearings).